Money Matters: Getting smarter about your credit score

Americans have become more informed about certain aspects of their credit scores, but most still don’t know enough about the risks associated with low scores and “credit repair” services.

A large majority of consumers now know many of the most important facts about credit scores. For example:

-- Mortgage lenders and credit card issuers use credit scores.-- Many other service providers also use these scores –landlords, home insurers, and cell phone companies.- Missed payments, personal bankruptcy, and high credit card balances influence scores negatively.- The three main credit bureaus -- Experian, Equifax, and TransUnion -- collect the information on which credit scores are frequently based.-- Consumers have more than one generic score. Making loan payments on time, keeping credit card balances under 25 percent of credit limits, and not opening several credit card accounts at the same time help raise a low score or maintain a high one.-- It is very important for consumers to check the accuracy of their credit reports at the three main credit bureaus.

However, most still falsely believe that credit scores are influenced by the age (56 percent) and marital status (54 percent), while 21 percent think ethnic origin plays a role in determining their scores. And approximately half (51 percent) are under the false impression that credit repair companies are typically helpful in fixing errors and improving scores, even though such firms often charge high prices to perform services that consumers could do on their own.

What You Can Do

A typical credit score will range between 300 and 850 points. Generally speaking, all lenders make decisions based on the particulars of the lending situations. With higher scores, most lenders will offer lower interest rate.

A few tips for raising or maintaining a higher credit score include:

-- Pay your account on time and keep your balance low.-- Be conservative in the amount of available credit you use at any given time.-- Hold on to older, unused accounts; the longer an account has been open and managed successfully, the higher your score will be.-- Maintain a diversified credit mix. If you hold an auto loan, a home mortgage and credit cards that are well managed, you will generally have a higher credit score than someone whose credit consists mainly of finance companies.

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